24.0 Trading Gangs

I was in my prepubescent age when I joined a neighborhood gang - five boys and one little pesky girl who could not be shaken off behind by her older brother. The little girl's name was "Diosa" and she was the gang's muse. Though her name belongs to the pantheon, she was our own version of Les Miserables' Cosette. And the boys? Well, we were then all the male version of Cosette, wearing hand-me-down tattered clothes with holes and patches in all the unintended places. But despite this, we were a merry bunch happily singing as we went about accomplishing our mischievous missions. 

Of the five boys, I was the only one who lived on the opposite street where all the other gang members lived. Our leader, the eldest among us, was an out-of-school youth who came from a family of blacksmith. He commanded respect, he being the eldest and therefore the naturally taller, more muscular, and wiser among us. He planned the "hit" and led in its execution. We had slingshots for weapons, our very own eyes for binoculars and our rugged feet for vehicles. The target was either the cornfields and fruit trees across the river or the innocent barrio lasses swimming in the river. Every adventure was exciting and testosterone-driven with a little element of danger. Our leader was smooth while I was a bumbling follower relegated to the task of carrying the loot or acting as lookout. He was a natural and I was not. But I was trying to fit in while attending classes and working on my after-school assignments. That was the 1970's. 

Back to the present, year 2012, I found myself being a member of a "trading gang" without really trying courtesy of an SEC commissioner who fancies herself becoming as the online spymaster of illegal trading activities. In her view, the trading gangs influence or at least try to "influence stock market prices and volumes by buying in unison . . . and the scary part is that some of their analyses are inaccurate which can hurt the issuers." (Reference: Business Mirror). I laughed on her first view that "trading gangs buy in unison" because it is partly true and I laughed even more I was almost in tears that "some of their analyses are inaccurate" because it is uber-true. Now here is the scarier part - anyone with this simple view can become a great spymaster. 

Let me break it down. Every stock trader, member of a trading gang or not, does wish to "influence" the stock market price in his/her favor. This is because every stock trader wants to earn and not lose money. Every stock trader also hopes to buy in unison with the other traders because who would like to buy a dead stock? At one point or another, two or more traders would exactly have the same buy and sell positions of a particular stock. These buy and sell positions would naturally grow in greater volumes depending on how bullish or bearish the market psychology is. It is also true that the so-called  trading gangs confer with each other on their chart analysis and if they do so concur, they will in all probability take positions of the same stock about the same time. Who would like to be left behind? But can they actually trade in unison as suggested by the commissioner? False. The trading gang is a loose organization whose members do not profess loyalty to a gang lord. Most of them do not even see or know each other and any assumption or attempt to buy in unison will crumble because each trader will be subjected to a "prisoners dilemma". 

The trading gangs have their own gurus, masters, and wannabes churning out technical analysis of this and that stock based on chart patterns, candlestick formations, indicators and oscillators, trendlines, among other stuff. I do this myself and the funny thing is that the observation of the SEC commissioner is right - the analyses are, in many, cases inaccurate. The stocks do not move exactly as we published them in the online forum or blog. But of course! The simple reason is that there are other factors not included or captured in the analysis which the good commissioner is better off focusing her sights on - insider trading, false rumors, fomenting the market, etc. - which the trading gangs do not have the advantage of information or the financial muscle and unity in executing such trades.  

I love my trading gang. It reminds me of the neighborhood gang of my childhood past long gone. Actually, it is a multiple of that and so much more. We have two muses, by my own making, whose names do not echo much like that of goddesses but who nonetheless stand among them in beauty and splendor. We fondly call our first muse as KB. She possesses such childlike charm and curiosity, who constantly nags every guru, master, and wannabee for tips and TPs (that is target price for the uninitiated). The second muse, we call her LT because she resembles that ageing star in her younger years - those eyes that can melt a thousand chocolate kisses. But she has been quiet of late. 

Our founder is Superman of Chinese descent and our membership is so diverse. We have chinoys, syanos, bisoys, shaq daytoys, mama sans and of course the OFWs eking out remittances that keep this economy afloat in troubled times and good. During trading, we merrily cheer our favorite stocks and boos known sharks. But when the market is boring, the conversation drifts to any topic other than the stock market and that is where I play the game most. Well, someone has to do the job of being the jester to keep the sanity in check of these trading addicts. This trading gang is just one of many. I am also a member of another trading gang. Hint, its initial is yummy for roasting. This other gang is going to have a Christmas Party soon and I will be going. Perhaps, the organizer may want to invite the good Commissioner so she will have a greater appreciation of how we keep the stock market alive.      

Truth to tell, we are not really a trading gang. We are just an online forum of small-time online traders who need each other's company. Online trading is lonely and this trading forum is helpful in so many ways. It makes you feel that you are not alone. If indeed we are a trading gang, I will stand proud to be part of it. 

23.0 Chasing Shadows

Once there was a dog which woke up early morning and stood outside his master's house to catch a glimpse of the first sunshine. It was not very much the sunshine itself that beckoned the dog to this daily ritual but the effect that it had on him as the sun cast the shadows of trees. The dog was mesmerized by the shadows  that it barked, jumped and ran circles around any shadow it fancied. But as the sun rose into mid-day, the shadows became shorter and shorter until they were all gone. Tired of all the chasing, the dog would retreat into his master's house to eat. Once re-energized, the dog was all ready for the afternoon show when the shadows reappeared on the opposite side. The dog ran outside the house and watched as the shadows slowly formed as small gray extensions that grew longer as the sun moved further west. Thinking that the shadows would continually grow, the dog was overcome with excitement that it barked, jumped and ran circles more than it did in the morning . But as soon as the night claimed the day, the shadows dissipated into the darkness. Disappointed, the dog retired into his master's house, his energy spent. As he lay down on the mat, the dog was thinking, "Tomorrow will be another day. The shadows will be there and I will be there too to give the chasing."

When I was new in stock trading, I traded like the dog in the story - I was chasing shadows. When I saw prices going up, I would be excited to buy these stocks even at higher prices thinking that these would continue to rise. Of course, they did rise some more making me froth with excitement at the prospect of hitting it big. I would jump off my seat and pump my fist while shouting, "Yes! Yes! Yes!". I was my own cheering squad possibly rivaling the UP Fighting Maroon PEP Squad in energy and spirit. Our helper and my mother-in-law must have thought that I had gone nuts and possibly may still be thinking the same until today.

Even when I saw a 5% or an 8% net gain already, I decided not to sell the stock. "Single digit gain is for beginners.", I would say to myself. What I wanted was double digit gain past 20%. But then all of a sudden the tables turned. The stock price suddenly went downhill catching me off-guard. I snickered at all those "tsupiteros" or day traders who secured their profits early as small-time profiteers. As the body of the green candle got smaller, I summoned all courage and hopes that it would go up again when all the "tsupiteros" had  their fill. But in many cases, it did not. The green candle not only grew smaller, it turned into a red candle that grew longer and longer in the afternoon as bearish mood set in. Many more jumped ship but not me. Like the dog in the story, I chased prices going down and rationalized it as cost averaging. Did this strategy work? Well, yeah it did in a few cases but it did hurt my portfolio in a lot of times more. 

There are two lessons that can be learned from this story. One is to never chase the price - either going up or down. Second is to secure profits early. These two lessons served me well very recently. On October 18, 2012, YEHEY debuted in the stock market by way of introduction and opened at 150% strong over its par value of P1.00 per share. Within 10 minutes, its stock price rose to a mind-boggling intraday high of P4.50 per share. It was a stock on steroids driven by the market in ecstasy. I held my guns silent that day never touching it from its holster already feeling uneasy at how it moved. Seconds later, YEHEY's stock price plummeted like the man who skydived from the edge of space and closed at only P2.70 per share. In the next three days, YEHEY stock went from one red candle to the next and closed at P2.25 at the end of trading on October 23, 2012 lower than its opening price on its maiden day. I could only gasped at how many traders were trapped but I survived because I did not chase the price that day.    

I also learned to become a "tsupitero" by taking profits early. I now understand where these guys are coming from. The old saying, "A bird in the hand is better than two in a bush." now sounds truer and more personal. Very recently, I bought and sold three stocks within a day - GREEN, BLOOM, and COAL that I feel I am becoming like a certified tsupitero. 

Today, like the dog in our story, I still wake up and excitedly wait for the market to open. The excitement is building up every passing minute and explodes as the market opens at exactly half past nine. The difference is that I no longer jump off my seat and pump my fist. I just cheer online with my newlyfound friends. And I wish to add, there is no more chasing shadows for me. And I hope you don't too.   

22.0 Killer Instinct

There is something about Assassin Movies that draw me over to watch them first before other movies. Albeit visceral, Assassin Movies provide me much needed adrenaline rush in the comfort and safety of a movie house sans broken limbs and bones. I love Assassin Movies whether this involves a stealthy ninja, a ruthless hired gun, a former government agent on the loose, or a femme fatale on vengeance path. Why am I talking about Assassin Movies in this post? Because assassins are good at what they do for a living as they possess something that is so lacking in my trading psychology; something that I have been wanting to acquire yet thus far only managed to get hold for a few seconds of trade only to lose it the next. That something is called "Killer Instinct". 

"Killer Instinct" is defined as "an aggressive and ruthless determination to win or attain a goal" (www.dictionary.com). While being aggressive and ruthless may be innate to assassins, the same may not always yield excellent results for stock traders and may even lead to devastating outcome instead. This is not the Killer Instinct that I have been wanting to develop for months now. What I am trying to develop is something better explained by a story (please indulge me at my attempt in writing a fictional assassin character as inspired by the many Assassin Movies I have seen). Here goes.

"He is a hired gun, the best in the business of taking down those who run opposed to the interest of his clients. Though he works with tipsters, forgers, hackers, and other underworld characters, he basically works alone. He does his job cleanly. No questions asked. And once the job is done, he disappears without a trace. Not a word  is heard nor a shadow of him is seen until the next assignment comes. That is why, his clients trust him. 


Every new assignment is treated like a first. He studies every detail of the subject, spending days and nights of stakeouts casing the subject's regular activities, acquaintances, as well as other routines and habits. He patiently waits and stealthily moves with the subject sometimes from a distance and occasionally just a few feet away like when he followed the subject to the comfort room for a pee. On these rare occasions, he does not stare at the subject but only gives him glancing looks like a wind that passes by but hardly noticed. Even during those times when he could have taken down the subject easily, he bided his time. He could have done so but the timing was not right; the exit plans were not yet made. For him, patience is a virtue. He knows judgment day has come only when he has the subject all figured out. He lays down the plan to the smallest detail - the time, the location, the exit plan, and cover up. He rehearses everything in his mind as if it is all too real. 

However, there were times that judgment day did not go as planned and had to be aborted. There was a time when his subject was already standing in front of the hotel exit door with his forehead already right at dead center of his sniper rifle's telescopic sight. But just seconds before he pulled the trigger, three cars screeched to a stop, doors swung open, burly men with pistols drawn stood out and took defensive positions, and the subject whisked off inside the middle sports utility vehicle and in seconds, he was gone. He could still have pulled the trigger and accomplished his task but it was all too risky. Once his position was exposed, a terrible shootout would have happened between him and the bodyguards resulting in several deaths, among them innocent bystanders and pedestrians. These were not part of the plan. That deadly scenario would have cost him his reputation if not his life. Hence, he kept his cool, aborted the operation, and calmly walked away. He, long ago, reconciled with the fact that some days do not always favor the assassin. But those times are few and rare. 

On countless times, the assassin does his assignment swiftly. Like today when judgment falls on his latest subject - a crossover showbiz politician on the verge of getting his party's nomination for presidency. His adorable personality disguises the inner devil who deftly machinates different social classes to achieve his ultimate ambition of someday becoming President. Unknown to many, he is the shadow protector of the largest land-grabbing syndicate in the country hiding behind his pro-poor, human rights charade. He pressures the very government he serves to pay the squatters as condition for them to move out of occupied lands while convincing landowners to sell these lands at bargain prices to the syndicate. Once done, the syndicate then sells these lands to the highest bidder among property developers. The showbiz politician then publicly donates to the largest religious charitable institutions and media foundations to further add to the masquerade. This made him hugely popular among the poor, his showbiz fans, the church, and media organizations. It is perfect crime. Until today.

The assassin was hired three months back to eliminate the showbiz politician by an anonymous client or clients. Three months of surveillance and he has him all figured out. His political party has recently endorsed him as their political candidate for the Presidency. He is set to deliver an acceptance speech in a national convention where movie fans, urban poor, the church, and the media are also in attendance. A week before the convention, the assassin already rented a room in the third floor of an apartelle that sits right across the open grandstand where the showbiz politician is to deliver his speech. In front of his room is a tree which serves as a perfect camouflage. The street is lined with bright streetlights which effectively reduces the spark that comes out of the barrel. Everything is set.

The time has come. The name of the showbiz politician is called and as he walks to the podium he raised his hands waving at the adoring crowd not knowing it is going to be an act of final surrender for him. The assassin hugs his M107.50 Caliber Long Range Sniper Rifle on the floor like a man for priesthood ordained. The assassin takes his aim and sees his target on sight up close in his telescope. As if acknowledging his presence, he sees the the showbiz politician turns towards his direction smiling. He then nods his head. With that symbolic approval of death, the assassin squeezes the trigger without a moment of hesitation. The silver bullet travels 853 miles per second hitting the target on its mark. There is pandemonium everywhere. The assassin stands and packs up his things.  It is another day at the office."

I am using the above story to describe four psychological traits of an assassin which I believe an independent stock trader must develop to succeed in the stock market. I believe you have figured it all out. Otherwise, you would end up at the other end of the assassin's gun for the stock market is full of it. Have the Killer Instinct or be killed.